Supply chain cliff averted, for now

December 28, 2012

The retail industry has temporarily avoided a shut down of 14 ports along the East and Gulf coasts following a 30 day extension of contract negotiations with organized labor.

The extension solves nothing, but it does give port operators and representatives of the U.S. Maritime Alliance and International Longshoremen’s Association time to iron out a new collective bargaining agreement that was set to expire on December 29. Retail industry trade groups welcomed news of the extension, while pushing for a longer term solution.

"Retailers welcome news that the ports will remain open for business through the busy spring shipping season. Retailers are however eager to see the parties reach a long-term agreement that will ensure stable and predictable operations at East and Gulf Coast ports," said Kelly Kolb, vice president of government affairs for the Retail Industry Leaders Association. "Ports play a critical role in the supply chain and a potential disruption would be harmful to the retail industry as it would lead to lost sales and aggravated customers."

National Retail Federation President and CEO Matt Shay noted that the contract extension was a better option than a work stoppage at 14 ports.

"While a contract extension does not provide the level of certainty that retailers and other industries were looking for, it is a much better result than an East and Gulf Coast port strike that would have shut down 14 container ports from Maine to Texas," Shay said. "A coast-wide port shutdown is not an option. It would have severe economic ramifications for the local, national and even global economies and wreak havoc on the supply chain."

Retailers are eager to avoid a situation similar to what happen on the West coast during the midst of the holiday season when a labor dispute result in eights day of severe supply chain disruptions at major ports in Los Angeles and Long Beach.

The contract extension was negotiated by the Federal Mediation and Conciliation Service (FMCS) which managed to get the parties to reach an agreement on undisclosed container royalty payments.

"The container royalty payment issue has been agreed upon in principle by the parties, subject to achieving an overall collective bargaining agreement," said FMCS director George Cohen.

The new deadline for contract negotiations is midnight, January 28, giving the parties time to negotiate all remaining outstanding issues, including some specific issues related to New York and New Jersey ports.

"Given that negotiations will be continuing and consistent with the Agency’s commitment of confidentiality to the parties, FMCS shall not disclose the substance of the container royalty payment agreement," Cohen said. "What I can report is that the agreement on this important subject represents a major positive step toward achieving an overall collective bargaining agreement. While some significant issues remain in contention, I am cautiously optimistic that they can be resolved in the upcoming 30-day extension period."

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